Ant Group is currently exploring opportunities for founder Jack Ma to divest and give up control of his stake in the financial tech giant when meetings with Chinese regulators signaled the company that the move could help draw a line under Beijing’s control of its business source, who are familiar with the thinking of regulators and two people who are closely related to the company.
Reuters reports for the first time the details of the last meeting and the discussions about the future of Ma’s control of Ant being carried out through an intricate structure of investment vehicles. The Wall Street Journal previously reported that in a November meeting with regulators, Ma offered to hand over parts of Ant to the Chinese government.
Officials from the Central Bank, People’s Bank of China (PBOC), and the China Banking and Insurance Regulatory Commission (CBIRC) had separate talks with Ma and Ant between January and March discussing the tycoon’s possibility of exiting the company, according to data the source familiar with the thinking of regulators and one of the sources closely related to the company.
Ant denied that a sale of Ma’s stake was ever considered. “The sale of Mr. Ma’s stake in Ant Group has never been the subject of discussion with anyone,” an Ant spokesperson said in a statement.
Reuters could not determine whether Ant and Ma would execute a divestiture option, and if so, which one. The company hoped Ma’s stake, which is worth billions of dollars, could be sold to existing investors in Ant or its e-commerce subsidiary, Alibaba Group Holding Ltd, without the involvement of an outside entity, one of the sources said Corporate ties with.
However, the second source, also with corporate ties, said Ma was told during talks with regulators that he would not be allowed to sell his stake to a company or person close to him and would instead have to get out completely. Another option would be to transfer its stake to a state-affiliated Chinese investor, the source said.
Any move would require Beijing’s approval, both sources said, well aware of the company’s thinking.
The reports provided by all three sources agree on the timetable for the development of the discussions over the past few months. On the corporate side, a source said Ma met regulators more than once before the Chinese New Year, which was early February. And the second source said Ant started working on options for Ma’s possible exit a few months ago. The source, familiar with the regulators’ deliberations, said Ant told officials during a meeting shortly before mid-March that options were being worked on.
The source familiar with regulators thinking has direct knowledge of conversations between Ant and officials, while one of the corporate relations sources has been briefed on Ma’s interactions with regulators and Ant’s plans. The other has direct knowledge of Ant’s discussions about options. They asked for anonymity because of the sensitivity of the situation.
The Ant spokesman made no comments from Ma. Alibaba referred questions to Ant. Jack Ma’s office did not respond to Reuters’ request for comment about Ant. The State Council Information Office, PBOC and CBIRC also did not respond to requests for comment.
The high-level discussions take place amid an overhaul of Ant and a broader regulatory restriction on China’s tech sector, launched after Ma’s public criticism of regulators in a speech last October.
Ma’s exit could pave the way for Ant to revive plans for an IPO that stalled after the tycoon’s speech, both sources close to the company said. Ant, who was about to raise an estimated $ 37 billion on the world’s largest public offering, abandoned plans the day after Ma met regulators on Nov. 2.
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“TOO BIG FOR YOUR BRITISH”
Since then, Beijing has launched a series of investigations and new regulations that not only ruled Ma’s empire, but also engulfed the country’s technology sector, including other high profile billionaire entrepreneurs.
For Ma, 56, who also founded Alibaba and once had cultic awe in China, the consequences were particularly severe. The tycoon withdrew completely from the public for about three months and continued to go low-profile after a brief appearance in January.
China’s antitrust agency fined Alibaba a record $ 2.75 billion on April 10 following an antimonopoly investigation that found it had abused its dominant position for several years. A few days later, Ant was asked by the central bank to become a financial holding company, which brought her within the scope of banking rules that she had previously avoided and that allowed her to grow rapidly.
“China is still happy to promote its tech companies as world leaders as long as they don’t get too big for their British,” said Andrew Collier, chief executive officer of Orient Capital Research.
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CONTROL STAKE
Despite previously stepping down from corporate positions, Ma retains effective control of Ant and significant leverage over Alibaba.
While he only owns a 10 percent stake in Ant, according to Ant’s IPO prospectus, Ma exercises control over the company through affiliates.
Hangzhou Yunbo, an investment vehicle for Ma, controls two other companies that together own 50.5% of Ant, the prospectus shows. Yunbo can decide all matters related to Ant and exercise the combined voting rights of the three companies, as stated in the prospectus.
Ma has a 34 percent stake in Yunbo, as the prospectus shows.
One of the corporate relationship sources said there was “a great chance” Ma would sell his stake in Yunbo to leave Ant, which ultimately paved the way for the fintech major to complete its overhaul and revive its listing to approach.
Reuters could not reach Yunbo for comment. Ant did not comment on Yunbo’s behalf.
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